Financial Markets and Institutions
B.Sc. Economics (HONS), Semester 8th, Group ‘A’
1. Financial markets operate under the:
a) Money markets
b) Product markets
c) Capital markets
d) None of the above
e) All of the above
2. The term ‘Financial’ basically refers to:
a) Money
b) Shares
c) Management
d) None of the above
e) All of the above
3. The system in which the spenders get funds from the savers through the financial
intermediaries is called:
a) Direct financial system
b) Indirect financial system
c) Both a) and b)
d) None of the above
4. Government of Pakistan regulates the whole financial system through SECP, which stands
for:
a) Surplus and Equity Commission of Pakistan
b) Surplus and Exchange Commission of Pakistan
c) Securities and Equities Commission of Pakistan
d) Securities and Exchange Commission of Pakistan
e) None of the above
5. Capital market securities are more liquid than that of the money market securities
a) True
b) False
6. The maturity of a debt instrument is the number of years until the instrument’s expiration
date.
a) True
b) False
7. Equity holders benefit directly from any increase in the corporation’s profitability.
a) True
b) False
8. Equities are considered to be long term securities because they mature in:
a) Ten years
b) Twenty years
c) Thirty years
d) None of the above
e) All of the above
9. An equity holder is a ‘residual claimant’ that is:
a) The corporation must pay all its debt holders before it pays its equity holder
b) The corporation must pay all its debt holders after it pays its equity holder
c) The corporation must pay its debt equity holder at the same time
d) None of the above
10. If Pakistan issues bonds in UAE, denominated in Pakistani Rupees is called
a) Foreign bond
b) Eurobond
c) Both a) and b)
d) None of the above
11. Loans which have immovable security at their ends are called:
a) Bonds
b) Mortgage
c) Pledge
d) None of the above
e) All of the above
12. In the proffered stockholder case, the price of the shares is _____than/to the price of
shares in common stockholder.
a) Lower
b) Higher
c) Equal
d) None of the above
13. The securities of the preferred stockholder can be call back any time by the corporation on
the prevailing market price.
a) True
b) False
14. Common stock can be converted into preferred stock and preferred stock can be converted
into common stock any time.
a) True
b) False
15. Dealers in over-the-counter (OTC) cannot make inventory while the brokers can.
a) True
b) False
16. In the process of Amortization, as time passes:
a) Both the principle amount and interest rate diminish
b) Both the principle amount and interest rate increase
c) The interest expense decreases and the principle amount increases
d) The interest expense increases and the principle amount decreases
17. If a company gives assurance to another company for its primary shares issuance that the
company will best try to sell the shares is called:
a) Full-script under writing
b) Best-effect under writing
c) Both a) and b)
d) None of the above
18. In indirect financial markets, the financial intermediaries intermediate _____ from surplus
entity towards the debt equity
a) Funds
b) Ownership
c) Maturity
d) None of the above
e) All of the above
19. Moral hazard is a situation of the adverse selection which comes _____ the transaction
a) Before
b) After
c) Meanwhile
d) None of the above
e) All of the above
20. When interest rate on bonds increases, the price of bonds:
a) Increases
b) Decreases c) Remains same
e) All of the above
Prepared by Ashtar Hussain Jan & Haad Khan
d) None of the above